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Federal Reserve Chair Ben Bernanke is heading to Capitol Hill to report on his economic stimulus exit strategy. An exit strategy is needed, since runaway inflation could be the result of the loose monetary policy and the trillions of dollars pumped into the U.S economy. Stimulating the economy has its price: Rapid growth leads to inflation. As a result, the subject of exiting economic stimulus measures in a way that limits inflation has been a major focus of economic policy makers.

Today, Ben Bernanke has prepared remarks about what he plans to do about exiting from the economic stimulus. Things seem to be somewhat cryptic, with Bernanke avoiding too many specifics, but the overall tone is meant to reassure us that things are well in hand. MarketWatch has a summary of Bernanke’s prepared remarks:

Bernanke said the Fed would also be flexible on the exact combination of tools it would use to move rates higher. No final decision on which rate to target had been made, the Fed chairman said. Bernanke did lay out possible tightening route. He said the Fed may continue testing its tools to mop up money from the financial system and then scale up these programs as the time for tightening draws near. The “actual firming” might come through an increase in the interest that the central pays to banks for their excess reserves. This was just “one possible sequence” Bernanke said. Bernanke stressed that the Fed could exit more rapidly if needed.

The stock market is not reacting too confidently to the remarks, instead focusing on the fact that the trade deficit is widening again. Yesterday’s stock market gains are being systematically erased as investors consider the situation. The wider trade deficit is concerning, as many worry that the mounting debt experienced by the U.S. government could become a serious economic problem, and this has investors worried that more trouble could be looming.

Disclaimer: I am not an investment professional. Nothing in this piece or on this Web site should be construed as investment advice. Before making investment decisions, do your own research and/or consult with an investment professional. All investment comes with the risk of loss. You are responsible for your own investment decisions and any loss that may result from your decisions.